The Supreme Court of India has recently delivered the AADHAAR-PAN judgement on the validity of S. 139AA of the Income Tax Act, vide which the quoting of AADHAAR no. for filing Income Tax returns post July 1, 2017; quoting of AADHAAR no. in any new application for allocation of PAN post July 1, 2017; and linking of AADHAAR no. with PAN no. post date to be announced by the Central Government; has been made compulsory. Furthermore, on failure to link AADHAAR with PAN, the existing PAN would have been invalidated with retrospective effect.
The above provision was challenged on mainly three grounds:
1. The enactment of provision was beyond the legislative competence of the Parliament.
2. The enacted provision violates the Right to Equality u/a 14 of the Constitution of India.
3. The enacted provision violates the Right to Practice any Profession, Carry out any Business, etc, u/a 19(1)(g) of the Constitution of India.
The Supreme Court has upheld the provision against all the above mentioned challenges while reading down proviso to S. 139AA (2), to the extent it applied retrospectively, to its application prospectively only; i.e., though the existing Pan Cards would become invalid if they are not linked to AADHAAR, but the invalidity shall not apply retrospectively. However, in the interest of Balance of Convenience, the Supreme Court has granted a stay on the operation of the proviso as a stop-gap arrangement till the bigger challenge on the question of infringement of privacy through AADHAAR has been decided fully and finally by the larger bench. So, the net effect is that if you are earning any income above the taxable limit, you need to have an AADHAAR post July 1, 2017, wrt which, it seems, a notification has also been issued by the government.
Legislative Competence: AADHAAR Act Is Not the Mother Act
The legislative competence of the Parliament to make AADHAAR mandatory under S. 139 AA of the Income Tax Act was challenged on three grounds: 1. When AADHAAR Act makes AADHAAR voluntary, I T Act couldn’t have made it mandatory; 2. S. 139 AA derogates the earlier interim orders passed by the Supreme Court making AADHAAR non-mandatory; 3. AADHAAR facilitates surveillance state, which is against the Limited Government as enshrined in the Constitution of India.
The Supreme Court rejected the first argument by holding that AADHAAR Act is not a Mother Act, and any other Act like the I T Act can make AADHAAR mandatory for a different purpose than that of the AADHAAR Act. To be very frank, I had also assumed AADHAAR Act to be the Mother Act, for it, for the first time, elaborated upon the authority and the process for issuance of AADHAAR numbers — I think even the government would have thought similarily. However, now when I read S. 56 of the AADHAAR Act, I am at agreement with the judgment though I would have much liked the judgment to deliberate more upon this aspect.
But I have a different argument. If I T Act independently makes AADHAAR mandatory, can it be done in a Finance Bill? This argument was neither raised nor answered by the Supreme Court. I know AADHAAR Act was also passed as a Money Bill, but the same has been challenged in the Supreme Court. Why the Supreme Court didn’t put up this question before the counsels for deliberation?
(I think the counsels also went with the assumption that the AADHAAR Act is a Mother Act. However, I am not sure if the senior counsels appearing in the Supreme Court can afford to be so smug esp when they charge such high fees and enjoy such high reputation.)
The other two arguments were actually not very forceful. However, I need to appreciate the argument wrt Surveillance State for its novelty. The courts are generally conservative by nature. If this argument were made in some other forum, it would have succeeded.
Right to Equality: Non-AADHAAR Holders Are Not a Separate Class
Though the judgment elaborately explains the concept of equality enshrined in the Constitution, but very simply speaking it means people can be classified and discriminated upon on the basis of the classification given the classification is reasonable, not arbitrary, and has nexus with the objective desired to be achieved with such a classification. Let me state at the outset S. 139AA creates three classifications: the Individual Income Tax Assessees and the other Assessees; the voluntary PAN holders/applicants and the mandatory PAN holders/applicants; and the AADHAAR holders and the non-AADHAAR holders. I have mentioned the three classifications because the judgment nowhere deliberated upon the effect of S. 139AA on the second classification, and nor did anybody argue wrt this classification. More about it later. Let’s first discuss the arguments made in the case.
The Counsel argued that though the classification of Individual Income Tax Assessees was not unreasonable as they indeed exist as a separate class, but this class was being discriminated upon or targeted without any nexus with the objective of curbing black money. He argued the other Assessees generate far greater black money but no curbs have been put on them. The Supreme Court rightly rejected the argument holding black money is a menance which has to be tackled through multiple ways and it can’t be a valid argument that another class generating more black money has not been targeted. I agree: It’s like Hindu men saying polygamy be curbed in Muslims first; that way polygamy in Hindus would have never ended (though I don’t think Polygamy per se is bad.
There was another argument with respect to classification into non-AADHAAR and AADHAAR holders, which was rejected by the court outright as a fallacious argument. Elsewhere, I have argued non-AADHAAR holders form a class unto themselves. In fact, this class is in minority, but it does exist, and S. 139 AA has accentuated this class. The court said this class is a class of convenience, whose only significance is with respect to the impugned S. 139 AA and has been artificially created to impugn the provision, albeit the impugned provision per se doesn’t create any such class. I think this is a seriously wrong approach. This way the government can always enact a provision discriminating upon one class of people, and when they would go to the court, the court would say their significance is limited to the impugned legislation. Or, in other words, their identity is linked to the impugned legislation, else they don’t have any identity at all. If the court had to make any such observation, it should have deliberated more comprehensively upon this than calling it just a fallacious argument. I think the argument was pretty well made out and deserved the attention of the court.
Now coming to the classification of mandatory and voluntary PAN holders. Elsewhere, I have discussed the ramification of S. 139 AA on the class of voluntary PAN holders/applicants. Voluntary PAN holders/applicants, as the name suggest, are not required to obtain PAN; however, they do obtain it as good citizens. S. 139 AA discriminates upon them by imposing an extra condition of AADHAAR to obtain or keep a PAN. This discrimination has no nexus with the objective of curbing black money as the voluntary PAN holders/applicants just don’t generate enough money to generate black money. This is in fact reverse discrimination even against the objective of curbing black money.
(I sent this argument to one of the petitioner in a tweet. I don’t know why he didn’t adopt it. Anyways, I have a feeling that this argument would have also been rejected as the judgment does talk of objective of curbing fake PANs while deliberating upon A 19(1)(g), which can be applied easily here also. I am discussing A 19(1)(g) below, so more about it later.)
Right to Practice any Profession: Biometrics Essential
Let me state at the outset, I found this judgment the most wanting in this area. Admittedly, the argument was only made with respect to infringement of Right to Practice Profession , Business, etc, under A 19(1)(g) because of the invalidation of the existing PANs with retrospective effect in case they are not linked to AADHAAR. The court rightly held that invalidation of existing PANs is a violation of A 19(1)(g) as the purpose of PAN is not only filing of returns but also many other activities like opening bank accounts, making cash transactions, taking telephone connections, etc, which are so basic to running a profession or a business that penal provision under S. 139 AA invalidating PAN cards on not linking them with AADHAAR would shut down the business or profession. However, then the court checked whether the penal provision is a reasonable restriction under A 19(6) of the constitution. The argument was made that once a case has been made out for infringement, the onus was on the government to prove it was a reasonable restriction. Further, it was argued that the restriction has to be checked on the fulcrum of proportionality. It should be seen if any alternative with lesser harm is possible. The government presented the regular BS. However, the court found the issue of fake PANs relevant. It also accepted the argument that AADHAAR has nill duplication and linking AADHAAR with PAN would eliminate the fake generation of PANs as well. It didn’t deliberate upon the question of proportionality at all. In the end, it only left it to the wisdom of the Legislature to provide for penalties.
The court completely failed to take cognizance of the fact that AADHAAR requires a person to divulge his biometric details. Is the court suggesting it is essential to divulge biometric details to the government to practice any profession or business in India? The mere thought of such a possibility is repulsive. All I know, only prisoners are forced to divulge their biometric details. However, in India, you need to give your iris scans to exercise your most basic fundamental right to practice a profession! What! Is this serious! Elsewhere, I have argued, albeit extravagantly, that India is being converted into a brothel, where prostitutes operate sans privacy. It seems the brothel has received the stamp of approval from no less than the Supreme Court of India.
The judgment started with a caveat that deliberation with respect to the effect of S. 139 AA on A 21 has been left open. I have a serious problem with such an approach. It has been held in Maneka Gandhi that fundamental rights don’t operate in isolation but in a continuum. Though I have argued elsewhere that A. 21 can indeed operate in isolation, but this is not one of those cases. Here, the Right to Privacy u/a 21 of the Constitution is definitely linked to the Right to Practice Profession or Business as well as the Right to Equality. Secrecy or privacy is the cornerstone of any profession or business, and mandatory AADHAAR under S. 139 AA on the basis of procedure set up under the AADHAAR Act, which is being challenged separately in a wholesome proceeding, does bring the Right to Privacy in direct connection with Right to Equality as well. However, I will have to admit the court didn’t discuss the procedure at all. But I wonder whether the deliberation u/a 14 can be termed complete unless the procedure for obtaining AADHAAR has been challenged and deliberated upon. So, to my mind, the judgment is not only short on the discussion on privacy but also on Art 14 itself. I think the court should have never heard this matter finally. It should have just decided the interim application, if any, without suggesting tagging of the petition with other matters concerning privacy.
Further, I think once the arguing counsels had made a concession that they shall not argue on privacy, the court should not have heard them on privacy at all. It is a serious waste of time, for which poor man suffers at the cost of a few senior counsels. I would go to the extent of saying such waste of court’s time tantamount to Contempt of Court.
Important Document Links
Comment Dt. 13.06.2017
I think I need to explain the term “Balance of Convenience” used above in the context of the stay to the operation of proviso to S. 139AA(2), I T Act, granted by the Supreme Court as a stop-gap arrangement. Balance of Convenience is the gauging of relative hardships to the contesting litigants on the grant or non-grant of the interim order. In an application for interim stay, this aspect has to be looked into in addition to the Prima Facie case, which is a dispute brought bonafide before the court deserving consideration on merit; for example, if a legislation is impugned in a petition seeking its quashing on the ground of “mere arbitrariness”, not ” manifest arbitrariness”, it would be an instance of lack of Prima Facie case. Of course, any case which is prone to fail on a preliminary technical objection is a lack of Prima Facie case. The third aspect which is looked into while granting an interim order of temporary injunction/stay is Irreparable Injury, which is an injury which can’t be compensated in terms of money.
However, all the above discussion is irrelevant in the present context. The above case has been decided finally on merit, and the stay has been granted only as a stop-gap arrangement, which is evident from the plain reading of the judgment. However, I have used the term Balance of Convenience to highlight the hardship that would be faced by the professionals/businessmen if and when their PAN would have been invalidated because of the operation of proviso to S. 139AA(2) I T Act, which is the sole reason for granting of this stay. It is also important to state here that the stay has been granted only as a stop-gap arrangement till the time the issue of infringement of privacy has been decided by the larger bench. Generally, such stays are granted by courts in the interest of justice to avoid hardships to litigants albeit while lacking jurisdiction to hear the matter on merit. Of course, the Supreme Court is a single court, which works through its many benches. In this particular case, the division bench hearing the matter lacked the jurisdiction to look into the issue of infringement of privacy because a larger bench is looking into it. So, to avoid hardship, it granted the stay in interregnum.
(To be very frank, I am prompted to write this addendum because of a fantastical “essay” written by a junior advocate explaining the stay albeit without any basis in law — in fact, he has not even understood that this is a stay on the operation of proviso to S. 139AA(2) I T Act, not S. 139AA(2) I T Act per se. I find he gets high ranking for his articles on Google, gets plenty of re-tweets, and also often gets quoted by “liberal” websites in their articles. I can’t help Google and Twitterati, but my advice to these “liberal” websites: Law is not like journalism, which can be learned in a single day.)
© 2017 Ankur Mutreja
Feature Image Credit: PTI